Allegiant's Strategy In Its Own Words

I had so much fun walking through Delta’s 10-K, that I thought I’d keep it going. Next up is Allegiant, and if you’ve never really fully understood the model, Allegiant does a great job of explaining it to you. Here are some highlights.

• “Based on published data from the U.S. Department of Transportation (”DOT”), we believe the initiation of our service stimulates demand as there has been a substantial increase in traffic after we have begun service for new routes. We believe our market strategy has had the benefit of not appearing hostile to either legacy carriers, whose historical focus has been connecting small cities to business markets, or traditional low cost carriers or LCCs, which have tended to focus on larger markets than the small city markets we serve.”
• “We design our flight schedule to concentrate our aircraft each night in our crew bases. This concentration allows us to better utilize personnel, airport facilities, aircraft, spare parts inventories, and other assets. We can do this because we believe leisure travelers are generally less concerned about departure and arrival times than business travelers. Therefore, we are able to schedule flights at times that enable us to reduce our costs.”
• “We actively encourage sales on our website. This is the least expensive form of distribution and accounted for 86.4% of our scheduled service revenue during 2008.” Considering they charge a fee to use their website for ticket sales instead of the ticket counter, this is good news for them.
• They don’t, of course, give specific plans, but they do hint as to where they are thinking would be good future expansion opportunities. “These potential markets include several popular vacation destinations in the U.S. (including the expansion of the current limited service we offer to Palm Springs, Oakland and San Diego, California; Reno, Nevada; and Punta Gorda, Florida which starts in March 2009), Mexico and the Caribbean.”
• “In addition, we temporarily suspend flying some Florida routes for varying periods (depending on the route) between the middle of August and the beginning of November as leisure demand to Florida tends to be quite weak during this time. We schedule crew training, aircraft maintenance and additional charter flying to coincide with this period. In 2008, we temporarily suspended flying on a number of Phoenix routes during the summer months for similar reasons.”
• “We generally begin our route selection process by identifying markets in which there is no nonstop service to our leisure destinations, which have a large enough population in the airport’s catchment area to support at least two weekly flights, and which are typically no more than eight hours round-trip flight time from the destination. The eight hour limit permits one flight crew to perform the mission, avoiding costly crew overnight expenses and increasing crew utilization and efficiency.”
• “A significant component of our ancillary revenue is from the sale of hotel rooms packaged with air travel. As of February 1, 2009, we have agreements with 61 hotels in Las Vegas, including hotels managed by MGM MIRAGE, Harrah’s Entertainment Inc., Boyd Gaming Corp., Wynn Resorts, Limited, and Las Vegas Sands Corp., 25 hotels in Orlando (plus 20 additional hotels in nearby Daytona Beach, Florida), 17 hotels in Tampa/St. Petersburg, 19 hotels in Ft. Lauderdale, 32 hotels in Phoenix, 10 hotels in Reno, Nevada and 10 hotels in Palm Springs. During 2008, we generated revenue from the sale of more than 400,000 hotel room nights. We believe the favorable breadth and terms of these contracts would be difficult for others to replicate quickly.”